By Kimberly L. Jamieson, CFS®, CRPC® - Financial Planner
Saving money can seem like an impossible task, especially with the high inflation and rising food and fuel costs. But it's important to have some funds set aside for emergencies and hard times. Here are a few tips that can help you save up for a rainy day.
1. Keep Contributing to Your Retirement Accounts
One good way to prepare for a financial crisis is to continue putting money into your retirement accounts. The up-and-down movement of the equity market should not deter you from saving. Last year when the stock market went by 20 %, many people became fearful and stopped investing. Think of a market downturn as a 20% off sale at Nordstrom for shoes. Just like you would jump on the chance to get a good shoe for less, you need to see a market correction as an opportunity to invest at a discount.
2. Plan Your Grocery Store Trips
When times are good and money isn't so tight, we tend to just pick and grab any items that appeal to us while grocery shopping. But you need to change this behavior to save for tough times. Have a strategic plan in place for your shopping and plan your meals for the week in advance. To avoid impulse or unnecessary purchases, create a list of the things you need that are not in your pantry and only buy items on that list. You should also consider shopping at grocery stores known to have lower prices, not those fancy trendy stores with exorbitant prices.
3. Review Your Media and Streaming Services
Many people subscribe to multiple streaming services they rarely or don't even use. This is money that can otherwise be saved for unexpected bills or emergencies. A lot of these streaming services are duplicates and repeat the same movies, if not the same month, a few months later. If possible, cut back on some of your media and streaming services to reduce your spending.
4. Shop and Reprice Your Cable & Internet Services
Internet and cable providers often offer discounted prices to new customers for an introductory period, after which the prices go up. So, it's good to shop around and confirm the actual costs of these services to see if you can get a better deal. You also want to review your bills regularly to be sure you are not paying any unnecessary charges or fees.
5. Consolidate Your Debts
Rolling up your debts into one payment can also free up some money that you can save for difficult times. So, if you have multiple credit and debit debts with high-interest rates, consider getting a low-interest personal loan to pay them off. Again, tackling your debts can help simplify your finances.
6. Lower Your House Running Costs
Household expenses can leave you with little or no money for savings. To prepare financially for an unforeseen circumstance or economic crisis, try to reduce your home running costs as much as possible. For example, instead of turning up the heat at home whenever you feel a slight chill, put on a sweater to cut down your heating bills.
7. Build an Emergency Fund
Having some money tucked away in an emergency fund, preferably in a high-yield mutual fund or savings account, can prevent you from using credit cards in times of need. Start slowly if you're unable to set aside a large amount of money at one time. Put aside a small amount into a savings account each paycheck, so you won't have to use credit cards when an emergency expense arises.
8. Resist the Urge to Upgrade Your Cell Phone
Avoid the temptation of changing your phone to the latest model as soon as it becomes available. Continue using your current phone after it has been paid off for an additional year and save the extra monthly payment you would have paid for an upgrade for future expenses.